Posts Tagged ‘Bank of America’

Global CIO & Head, Global Fixed Income, Currency & Commodities Group of JPMorgan Bob Michele, who earlier today was on CNBC, admitted “Gold at $1,200 an ounce, what does that tell you? It tells you that in a flight to quality, people have more confidence in gold than in bank deposits or paper money. I think things have gotten out of control.”

The Fed will follow the footsteps of negative rates in Sweden, Denmark, Europe, Switzerland & now Japan. Will this crush money markets as we know them & unleash even more volatility & havoc around the world? Absolutely. But at this point, when every other central bank has lost credibility “what differnce will it make” if the Fed joins the party on the central bank Titanic?

Short-term, markets seem intent on forcing either the Fed to pass in September, or the Chinese to launch a more comprehensive and credible policy package to boost growth expectations. Alternatively, a credit event in commodities may be necessary to cause policy-makers to panic. Markets stop panicking when central banks start panicking. Make sure to have a lot of gold and silver.

Investors looking for income have turned to junk bonds. Junk bonds didn’t grow much from 2002 to 2008. But when the Fed cut rates to zero in 2008, junk bond issuance began to take off & the number of junk bond issues soared 483% between 2008 and 2014. Today, some of the savviest investors are starting to place bets against junk bonds. Exit junk bonds today.

Bank of America highlights problems with raising rates. The real economy in the U.S. is not currently strong enough to withstand a rise in interest rates. That raising rates could cause a shock to the markets & economy. To deal with this they advocate adding gold to one’s portfolio along with higher levels of cash.

Venezuela’s primary export is oil, that has been slammed in recent months on tumbling oil prices. Venezuela faces a cash crunch following maturity of a 1 billion euro bond this month & coupon payments of $700 million in April. Its central bank is in talks with Wall Street banks to create a gold swap in exchange for $1.5 billion cash.

When people realize that their money is not “safe” with the banks they will start withdrawing cash from their accounts and buy physical gold and silver instead. Depending on circumstances this could possibly bring down the (fractional) banking system. Why keep money in an account that gives you a negative return?

The direct negative effect of lower oil prices on Energy earnings is clear. Given this historical relationship and oil futures prices, Energy earnings are likely to drop by more than 50% year/year in 2015. This fall would result in an S&P 500 earnings drag of roughly $65 billion, or more than $7 of EPS vs. 2014.

Shadow Banking is being tamed because changing structure of TSF suggests that Beijing’s efforts in controlling some types of shadow banking have made some achievements. If shadow banking collapse virus has finally jumped to China, there is no saying how far Chinese GDP can drop if it is now constrained on the top side by surge in bad debt.

Perhaps an even more relevant question than how long will the EPS “addback” bullshit continue, is how long will the regulators and enforcers allow Bank of America to exist as an organization for which two-thirds of its “ordinary course business” is, for lack of a better word, crime?

A new research paper has found “robust evidence” that some traders have been getting early news of U.S. Federal Reserve rate announcements and then trading on it during the Fed’s media lockup. This was not just HFT front-running but actual ‘information’ leakage… from whom we wonder?

Its true that the Volcker Rule wouldn’t have prevented the financial crisis. So is your money safer in the bank with the Volcker Rule than without? There’s no concrete answer, but given that the loopholes are big enough to drive Jamie Dimon’s private jet through, I would say no.

TBTF Banks can borrow more cheaply in bond markets than smaller rivals (an average 0.31% less on A-rated debt than their smaller peers), in part because of investor perceptions that they are too big to fail. This insensitivity of financing costs to risk encourages too-big-to-fail banks to take on greater risk.

In its attempt to reflate asset prices at all costs & succeeding with both the stock market & new housing bubble, the Fed has made housing unaffordable for the vast majority of the population, forcing Americans to scramble for rental housing, sending rents to all time highs.

The concern for emerging markets is that carry trades and subsequent inflows of capital have created substantial credit and real estate bubbles in many of these markets. The unwinding of these bubbles is likely to lead to banking crises in several countries, including China.

We don’t want to cause you unnecessary stress or worry, but it might be prudent to pay attention to a series of unusual news reports recently emanating from the banking world. Do you really want to entrust your hard earned savings to these completely irresponsible institutions?

Global financial and commodity markets are warning that the US Dollar is in for a bout of trouble, warns (Bank Of America) BofAML’s Macneil Curry. Across assets gold has been the lead market against the US Dollar; having forged its base back in mid December.

After the crash of September 2008, the term “too big to fail” became familiar when hundreds of billions of dollars were set aside to bail out BANKS -The nations largest financial institutions. And today, many of the mega-banks that caused the panic of 2008 have now become even larger.

While everyone focuses on the breakneck money creation by the Fed and the BOJ, what happened in the past month is that China quietly created some 20% more money – For those curious, here is a more detailed breakdown of the Chinese numbers from Bank of America.

The universe of derivatives deals has grown much larger than in 2008, effectively untouched by President Obama’s so-called financial reforms – Even if the whole planet were offered as collateral, it could not cover Wall Street’s bets.